On January 30th 2020, the President of the WHO announced: “….. for all these reasons, I declare the outbreak of novel coronavirus (2019-nCoV) a Public Health Emergency of International Concern”. A world crisis had been declared and, as the pandemic spread, each country mobilized independently the forces deemed appropriate to deal with the aggression of the coronavirus.
Initially, it entailed the closing of borders, followed by imposing more or less strict lockdown measures with constraints on individual freedoms; everywhere EU regulations were either suspended or ignored. However, to their credit, most governments chose to prioritise fighting the health urgency to the detriment of its economic consequences.
Confronted with an unknown enemy, it is hardly surprising that many countries were caught unaware, revealing a state of unpreparedness bordering in some cases on outright negligence. Despite warnings, largely ignored (often for budgetary considerations), the political authorities were compelled to make urgent decisions based on evolving if not contradictory scientific advice; this led inevitably to many errors of judgment, aggravated by an often poorly managed communication’s policy. On the other hand, financial support measures without precedent were enacted rapidly and massively, demonstrating an unusually prompt reaction capacity.
As far as the EU is concerned, the peak of the pandemic appears to be past and under control; it is a tribute to the civic-mindedness of the population at large, to numerous acts of individual solidarity and to the dedication of the professionals in sectors responsible for the health and material survival of citizens.
Nevertheless, the population seems dazed awaiting, in fear for some, totally oblivious for others or conspiring to reap political advantage for the more cynical, that the inevitable metastasis of the epidemic surface: mass unemployment, cascading bankruptcies, loss of purchasing power, rising poverty, etc., on a scale that is expected to be of historic proportions.
Confronted with such reality, one seems unable to draw the most obvious consequences: that in a world that has become, for better or for worse, deeply interdependent, the only valid response to the crisis implies solidarity at individual, national, continental and global level, if there is to be any hope of limiting the damage that is about to unfurl.
In fact, lurking behind pronouncements aiming at appeasement or at propagating utopian expectations, never has there been so many armed detonators – in addition to the pandemic – ready to trigger a new world-wide conflict: be it the collapse of the international financial system due to a lack of trust (in markets or currencies), exacerbated trade competition (building on protectionist trends in China, the USA or due to Brexit), distortions of vital flows (resulting from the staggered re-establishment of international relations), continuing geopolitical tensions (opposing deadly political and/or religious ideologies), an increasing risk of a social disturbances (in response to rising inequalities and privileges), the spreading of a moral crisis (discriminations, racism, violence, populism…), etc., each of these fuses is liable to set off an unstoppable explosion.
The variable geometric interdependence between all these parameters is all the more difficult to decipher that experts put forward apparently rational arguments in the subjects on which they are consulted, but fail to take into account externalities, including those that their own theories generate.
An emblematic example of this slight of mind is the justification given for the quasi unlimited support that governments are envisaging to deploy to combat the crisis. The argument suggests that, in spite of financing the recovery exclusively through astronomical amounts of debt, expressed in trillions of € or $ (taxation being ruled out), the economy will remain – according to the nearly unanimous opinion of experts – largely immune to the dangers of a spike in inflation for the foreseeable future.
Without paying any attention to possible contradictions, it is simultaneously argued that: the debt issued within this framework is not repayable as long as it sits on the books of Central Banks; debt can therefor finance the recovery without any limitations and, at prevailing rates, “costs nothing”; that the State can both protect workers purchasing power and fulfill all its promises in order to forestall social unrest (adjusting the salaries of the medical profession, teachers, saving whole industries, investing in innovation, etc.); that it is mandatory that Central Banks maintain ultra-loose monetary policies; that the rebound in stock markets is justified, despite the absolute certainty of the coming crisis, because investors are compelled to buy equities (bonds having zero yields); that skyrocketing prices of companies in administration (Herz, J.C. Penny…) relies on the hypothetical rescue by governments who can ignore any constraints under present circumstances; etc.
In the face of such unanimity, it is high time to take one’s distances from such a consensus, which is rapidly taking on the characteristics of the myth of the Tower of Babel. Indeed, even it is true that the paradigms governing economic management change over time and that authorities have recently demonstrated an unusual capacity to adapt, all these arguments rely implicitly on a single false and simplistic hypothesis: “everything else being equal!” It is indeed almost certain that one of the triggers referred to above, will render these justifications void, making the resurgence of inflation not only possible but probable, unless an even worse deflationary scenario prevails.
As far as the USA are concerned, the support of the economy owes at least as much to the electoral ambitions of President Trump as to sound economic management. In the UK, upholding a “no deal” Brexit – despite the pandemic – is justified by the hope of convincing other Member States to follow the UK’s example. Within the EU, tensions surrounding the recovery program and its implications on the MS’s sacrosanct “sovereignty” are only starting.
In summary, all these arguments appear “acceptable” as long as they postpone the taking of difficult decisions. History teaches us that refusing to confront reality ultimately leads to paying a much higher price. The EU has an opportunity to soften – but not avoid – the impact of the crisis. By withdrawing behind their respective national “Maginot Lines” the Member States are allowing their illusions to prevail while misinforming their citizens and jeopardizing both their survival and freedoms.
It is high time to move on from the shillyshallying of the “phoney crisis” to responsible and deliberate action. Our elder had indeed sworn: “NEVER AGAIN!”